DALLAS – A Kansas highway coalition will fight legislative plans to divert a portion of Kansas’s state sales tax to the general fund from a $7.8 billion statewide transportation program.

A bill introduced Jan. 28 by the House Taxation Committee would reallocate the revenues generated by a 0.4% sales tax now dedicated to the Transportation Works for Kansas program by Kansas Department of Transportation.

The T-Works financing program includes $1.3 billion of state highway revenue bonds, of which $725 million remain unissued.

The diversion bill was proposed by Rep. Virgil Peck, R-Tyro, chairman of the transportation budget committee.

Economics Lifelines, which includes labor unions, highway contractors, and business groups, opposes the redirection of the dedicated tax revenues from the state highway fund, said executive director Michelle Butler.

“Kansas communities are counting on these funds to support the transportation investments that are key to providing jobs and growing the Kansas economy,” she said.

Projects funded through the collections dedicated to the highway fund, including the T-Works effort, benefit the entire state, the group said in its statement.

“Economic activity and job creation are the best solutions for a budget shortfall and the jobs created by the T-Works program are, in fact, driving the economy,” the resolution said. “The state must stop relying on transportation-dedicated funding as a readily available source of funds.”

Economic Lifelines does not oppose Gov. Sam Brownback’s plans to transfer more than $500 million from the highway fund to the general fund over the next two years, Butler said.

“The governor’s proposal keeps the permanent dedication of the 0.4% tax to the highway fund,” she said.

The portion earmarked for KDOT was to be the permanent part of a 1% increase in the rate levied by 2010 Legislature, with 0.6% pledged as a temporary boost to the general fund as state revenues plummeted.

The dedicated sales tax generated $313 million for the highway fund in fiscal 2012, or about 25% of the total state funding. Sales tax revenue is expected to provide 34% of the collections deposited into state highway fund in fiscal 2014.

KDOT said it could accomplish the governor’s proposal due to lower-than-expected construction costs and low interest rates on bonds issued for T-Works.

The state general fund received transfers from the state highway fund of $143 million in fiscal 2009, $149 million in fiscal 2010, and $205 million in fiscal 2011.

The legislation authorizing the 10-year T-Works program includes a stipulation that at least $8 million of work occurs in each of the state’s 105 counties. The comprehensive program is expected to provide $4.2 billion for highway repairs and maintenance, and $1.8 billion for modernization and expansion.

KDOT’s $1.54 billion of outstanding highway revenue bonds are rated Aa1 with a negative outlook by Moody’s Investors Service, AA-plus and stable by Fitch, and AAA and stable by Standard & Poor’s.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.